Spirt v Spirt 2024 NY Slip Op 31873(U) May 22, 2024 Supreme Court, New York County
Docket Number: Index No. 160271/2023 Judge: Gerald Lebovits is not a legal malpractice case. It is an argument between brother and sister over an inheritance. Nevertheless, Judge Lebovits averts to the question of disgorgement and legal malpractice.

“In December 2016, Zuckerman opened the IRA at issue, designating plaintiff as its sole
beneficiary upon Zuckerman’s death. Plaintiff alleges that between December 2016 and August 2017, Zuckerman began to show increased “signs of dementia and cognitive decline, and became more and more dependent upon” defendant. (NYSCEF No. 1 at ¶ 9.) On August 17, 2017, defendant took charge of Zuckerman’s financial affairs. (Id. at ¶ 11.) On August 29, 2017, Zuckerman changed the beneficiary of the IRA from plaintiff to defendant. (Id. at ¶ 14.) Zuckerman died in September 2018.

In October 2023, plaintiff brought this action. Plaintiff alleges that the 2017 change of
beneficiary was either a forgery by defendant or the product of fraudulent inducement or undue influence exercised by defendant over Zuckerman. Plaintiff asserts five causes of action. The first three causes of action, sounding in undue influence, fraud, and unjust enrichment, seek damages in the amount of the IRA balance at Zuckerman’s death. The fourth cause of action requests a declaratory judgment that the change of beneficiary is void and that plaintiff is the rightful beneficiary. The fifth cause of action seeks disgorgement of any funds distributed to defendant from the IRA.”

“Finally, defendant argues that plaintiff’s cause of action seeking disgorgement should be dismissed because disgorgement is a remedy, not a freestanding cause of action. This court agrees. In NWM Capital, LLC v Scharfman, for example, the First Department held that a plaintiff’s “allegations of disgorgement do not preclude dismissal” of plaintiff’s claims against defendants against whom claims would not otherwise lie, because “disgorgement in this context is a remedy, not a cause of action.” (144 AD3d 414, 415 [1st Dept 2016]. Similarly, in Marcum LLP v L’Abbate, Balkan, Colavita & Contini, L.L.P. (222 AD3d 486, 488 [1st Dept 2023]), the First Department treated plaintiff’s request for disgorgement of attorney fees it had previously paid to defendants as, “essentially, a claim for monetary damages in connection with [plaintiff’s] legal malpractice claim”; and therefore that dismissal of the malpractice claim also entailed
dismissal of the disgorgement claim.

This court holds only that plaintiff may not maintain a freestanding claim sounding in
disgorgement. This court need not, and does not, reach on this motion the question whether plaintiff may obtain disgorgement as a remedy should he prevail on one or more of his other causes of action.”